Japan’s Nikkei 225 Retreats Second Day on Overheating

By Anna Kitanaka -
Mar 13, 2013

Japanese shares fell a second day
amid concern equities rose too fast after the Nikkei 225 Stock
Average this week reached its highest since September 2008.

Japan Steel Works Ltd., which gets most of its revenue from
making casting machinery, fell 4.6 percent after a three-day
rally. Kansai Electric Power Co., Japan’s second-biggest utility
by market cap, led a decline in the sector after Kyodo News said
the government will push for conservation this summer. Nissan
Motor Co., which counts North America as its No. 1 market,
climbed 0.6 percent before U.S. data expected to show retail
sales accelerated.

The Nikkei 225 fell 0.6 percent to 12,239.66 at the close
in Tokyo after reaching a four-and-a-half year high on March 11.
Volume on the gauge was 27 percent below the 30-day average. The
Topix Index fell 0.4 percent to 1,031.42.

“We’re seeing a bit of consolidation in the market, rather
than a correction, as investors take profit following some rapid
gains,” said Soichiro Monji, chief strategist at Tokyo-based
Daiwa SB Investments Ltd., which manages about 6 trillion yen
($62 billion). “We’re seeing a lot of better-than-expected data
in the U.S., and it’s all pointing to a fundamental recovery.”

The Topix rallied 43 percent since elections were announced
on Nov. 14 amid optimism a new government will do more to beat
deflation. The gauge trades at 21.1 times estimated earnings,
compared with 14 for the Standard & Poor’s 500 Index and 12.7
for the Stoxx Europe 600, according to data compiled by
Bloomberg.

The Topix’s 14-day relative strength index, a gauge of
market momentum, is above the 70 threshold that some traders
view as a sign the market is overbought. Japan Steel Works
slumped 4.6 percent to 515 yen to lead declines on the Nikkei
225 after rising the past three days.

U.S. Data

Futures on the S&P 500 Index climbed 0.1 percent. The U.S.
equity gauge fell 0.2 percent yesterday, snapping a seven-day
rally that drove the benchmark to within nine points of its
record high. Data today is expected to show U.S. retail sales
rose 0.5 percent in February as the job market strengthened.

In Japan, two opposition parties said they will endorse
Kikuo Iwata for central bank deputy governor, reducing the risk
that Prime Minister Shinzo Abe’s three central bank nominees
will be rejected. The main opposition Democratic Party of Japan
yesterday said it would vote against Iwata while supporting Abe
nominees Haruhiko Kuroda for governor and Hiroshi Nakaso for
deputy.

Japan Tobacco

Among stocks that rose, Japan Tobacco Inc. gained 7.2
percent to 3,205 yen, the biggest gain on the Nikkei 225. (NKY)
Trading volume was more than four times the average for the
shares over the past year as demand from investors is more than
double the number of Japan Tobacco shares on offer by the
government, a Ministry of Finance official said yesterday.

Nikon Corp. increased 3.2 percent to 2,118 yen, the biggest
gain in eight weeks. The world’s second-biggest camera maker by
sales rose on a Nikkei newspaper report that the company will
trim its inventory of cameras by 20 percent by the end of March.

The Nikkei Stock Average Volatility Index (VNKY) fell 4.4 percent
to 24.60 today, indicating traders expect a swing of about 7
percent on the benchmark gauge over the next 30 days. Trading
volume for equity options in Japan yesterday reached its highest
level since January 2011, according to the Tokyo Stock Exchange.